If I own a dance studio but just lost a large amount of students and will not be able to pay my rent, what can I do?

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If I own a dance studio but just lost a large amount of students and will not be able to pay my rent, what can I do?

I have a year left on my lease. Do I have too claim bankruptcy?

Asked on August 18, 2014 under Real Estate Law, California


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

If you can't pay your rent, your landlord could, once you default (fail to pay when rent is due), evict you *and* sue you for the rest of the money due under the lease, for the remainder of the lease term. Here are your options:

1) Talk to your landlord: maybe he/she would let you out of the lease, particularly if you either find another tenant to take over or if you pay some penalty (e.g. maybe pay 2 months rent as a penalty).

2) Or talk to your landlord to see if the landlord will give you a break on the rent--he or she might, as opposed to having vacant space once you are out.

3) Sublet, if your lease doesn't prohibit it. Maybe you can find another dance or fitness studio that will take over some of the space, or take over all of the space part time, for example, and get enough from them to make your rent.

4) If the tenant is not you personally but is an LLC or corporation *and* you did not personally guaranty the rent, then only the business (the LLC or corp.) is liable for the rent. If you can't work things out as above, you could potentially walk on the lease and only the money, if any, in the company is at stake. You can't do this is you personally are on the lease or guaranteed it.

5) If all else fails and you personally are liable for more than you can afford to pay, you can then file bankruptcy, but that should be a last resort. Bankruptcy will let your reduce or eliminate debts (including under the lease) and will *temporarily* stay, or halt, eviction; but it will do signficant damage to your credit for years to come.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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